Old and poor have suffered most from inflation in last decade says influential
think tank the IFS.

The poorest British households have faced a higher rate of inflation over the past decade than their higher income peers, according to research from the Institute of Fiscal Studies (IFS). The lowest income households – a fifth of the population – faced an annual inflation rate of 4.3pc in the two years between 2008 and 2010, compared to just 2.7pc for the most affluent members of society.

Pensioners have experienced a faster rate of inflation than non-pensioners, with those who rely on state benefits being hit hardest.

There are some winners however. As a result of a record low Bank Rate, home owners have seen their mortgage payments greatly reduced – as much as halving in some cases. This has meant the difference in the inflation faced by households at the opposite ends of the income scale has intensified during the recession. As the more affluent benefit from smaller mortgage payments.

Household bills have increased however, as the price of commodities such as food, gas and electricity have grown. The IFS report that domestic energy prices more than doubled between 2000 and 2010. The think tank say that this increase in prices has caused a change in behaviour as the lower income households are forced to reduce their fuel usage.

An IFS spokesman said: "Our modelling suggests that the average household in the poorest fifth of the population will reduce fuel consumption by 6pc in the face of a 10pc fuel price increase. Amongst the richest fifth, by contrast, we estimate the average response to be unchanged fuel consumption. This suggests that if prices do rise in the future spending on fuel will increase on average more for higher income households than for lower income households, but that, at least in the short term, lower income households will heat their homes less."